I earn Rs 90K a month. How can I plan to save tax and future EMIs for home loans?

My income is Rs 90,000. Right now, I am working from home till March 2024. How should I plan to save more taxes on other investments and future EMIs for home loans? 

My monthly expenses are 

How much tax do I have to pay? Calculate now

• Credit card bills: Rs 19,000-20,000 
• Rent: Rs 22,000 

Investments 

• Mutual funds SIPs: Rs 10,500 monthly 
• PPF: Rs 1,50,000 yearly 

I need help with other tax instruments to save taxes as it’s approx Rs 48,000 yearly. I have excess funds of Rs 1.1 lakh, which I gave as a loan to a friend.  

Reply by Prabhakar K S, Founder & CEO, Shree Tax Chambers 

Since the salaried taxpayer is in the higher bracket, his/her tax exemption options are very much restricted. Tax savings option under Section 80C being fully exhausted, he/she can still explore Section 80D of the Income Tax Act, 1961, which deals with health insurance premia.  

Health Insurance Premia 

A taxpayer can claim the following expenses/payments paid through banking channels—other than cash—for self, family or spouse and children, and parents, preventive health check-ups, medical expenses incurred on senior citizens, but they are not covered under any other health insurance schemes and contributions made to the central government’s health schemes. 

A taxpayer can avail the maximum amount of Rs 1 lakh under Section 80D. For instance, health insurance premiums paid for self and family, excluding parents, can claim up to Rs 25,000 (including preventive health check-ups). In the case of self, family, and parents below 60 years, can claim up to Rs 50,000 (for self, family, and parents, Rs 25,000 each, including preventive health check-ups Rs 5,000). For self and family below 60 years but parents above 60 years, can claim up to Rs 75,000 (for self and family Rs. 25,000, for parents Rs. 50,000 including preventive health check-ups Rs 5,000) and in the case of self, family, and parents above 60 years can claim maximum deduction of Rs 1 lakh (for self and family Rs. 50,000 and parents Rs. 50,000 including preventive health check-ups Rs 5,000).  

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Home Loans Principal and EMI   

As far as the plan of availing of a home loan and its interest in the near future is concerned, a taxpayer will be allowed to deduct both home loans’ principal repayment and interest. Since Section 80C is being utilised to the maximum extent for PPF in the given case, the principal amount will not be eligible to claim tax exemption as such. For the interest portion, a cap of Rs 2 lakh is fixed under Section 24 of the said Act. However, the said loan should be taken for the purchase of / construction of the house, and it should be completed within 5 years from the end of the financial year in which the loan was taken. 

Since very limited options exist, the taxpayer may rework his / her portfolio by investing in the National Pension Scheme (NPS) and avail tax exemption under 80CCD(1) within the overall ceiling of Rs. 1. 5 lakh and additional deduction for investment up to Rs. 50,000 under Section 80 CCD(1B) of the said Act.    

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